Range to up ante in Marcellus with sale of Barnett properties

Posted October 29, 2010

Observer-Reporter
Staff and wire reports

Range Resources Corp. said Thursday it will put its Barnett Shale properties in Texas up for sale and redeploy the assets in its Marcellus Shale play.

The announcement, originally made with Range's third-quarter financial results - reported after the close of Wednesday's stock market - was given more detail in a conference call Thursday with financial analysts.

Range Chief Executive Officer John Pinkerton and several other senior management officials noted that the company reviewed all of its holdings before deciding to sell its interests in the Barnett, one of the first non-conventional shale plays in the U.S.

According to Pinkerton and Range Senior Vice President Jeff Ventura, the reason for the redeployment centers on the company's goal of focusing on its most efficient gas plays, particularly in an environment of lower prices being paid for natural gas.

The Fort Worth, Texas-based company announced a 22 percent decline in realized prices for its natural gas, despite a 16 percent decrease in its unit costs.

The company, which has its Appalachian Shale division headquartered in Southpointe, said net income for the third quarter was down $8.2 million versus a loss of $29.8 million for the prior-year quarter. Diluted earnings per share was a loss of 5 cents versus a 19-cent loss for the third quarter of 2009.

Range is marketing its Barnett Shale holdings that include 53,000 acres, 360 producing wells and roughly 1,000 drilling locations. The company said its net production from the Barnett region is expected to average 120 to 130 million cubic feet per day in the fourth quarter. Ventura contrasted that figure with the Marcellus, which currently produces between 200 to 400 million cubic feet per day. He acknowledged that production could grow to as much as 2 to 3 billion cubic feet per day in the next several years.

Pinkerton said several companies have expressed interest in the Barnett holdings. Range hopes to complete a sale by the end of the first quarter of 2011.

One of the reasons Range wants to focus more of its capital in the Marcellus region is because of the yields it receives from so-called "wet gas" it draws from wells in Southwestern Pennsylvania.

Range continued to set record production, noting that its average of 503 million cubic feet per day across all of its holdings represents a 15 percent increase over the prior-year quarter. Production was 77 percent natural gas and 23 percent natural gas liquids and crude oil. It noted that drilling in the liquids-rich portion of the Marcellus Shale play as well as in the Midcontinent and Permian Basin regions are driving the company's production growth.

According to Range, on a year-over-year basis, natural gas liquids and crude oil production rose 62 percent, while natural gas production was up 6 percent. The liquids are byproducts of natural gas production, which is distilled to produce valuable non-methane products such as butane and propane.

Pinkerton said the size of the company's newer shale plays was a major reason for marketing the Texas property.

"Our portfolio of high-quality, high-return projects is leading the way as shown by the results of the liquids-rich plays in the Marcellus Shale play as well as in the Midcontinent and Permian areas," Pinkerton said. "Our confidence in the quality and size of these plays was one of the key reasons we have decided to market our Barnett Shale properties."

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